The first half of 2015 experienced a 'big shed' development boom which is still continuing, according to recent research.

The data published today 17 July by BNP Paribas Real Estate states an undersupply in the logistics market sparked the upturn.

The Big Shed report reveals that design and build (D&B) deals on units over 100,000 sq ft accounted for 8.4 million sq ft of transactions in H1 2015.

The publication also revealed work had begun on 7.6 million sq ft of speculative development since the state of the year, the highest total since 2007.

Retailers helped drive take-up of industrial accommodation to 13.6 million sq ft in the UK during the first six months of 2015, up 7% on the same period in 2014.

Activity by retailers accounted for 60% of the total take-up figure.

Discounters such as Lidl, Aldo and TJ Morris took up 1.7 million sq ft, including new hubs in Scotland (Lidl) and Wales (Aldi).

BNP Paribas Real Estate's Nick Waddington said: "Over the past 18 months the dire lack of supply in the UK’s industrial and logistics markets has seen occupiers increasingly looking at design and build as the best route of acquiring the space they need. The willingness of developers to make a start on many speculative developments is also helping to alleviate a chronic supply shortage.

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"To enable them to keep pace with the growth of online sales, more and more retailers are reconfiguring and adapting their supply chain networks, which has a knock-on effect on the demand and supply levels of distribution property."

Activity in the investment market has been more subdued during the first half of the year compared wit the volumes transacted during 2014, with £1.8 billion transacted, 16% down year-on-year.

The report reveals Standard Life’s forward funding deal of a new 638,000 sq ft John Lewis distribution centre at a net initial yield of 4.2% remains the market benchmark.

It also reports that, during Q2, the Brake Brothers distribution property in Harlow was purchase by Tritax at a net initial yield of 5% and L&G paid AXA £53.7 million for the Barking Rail Freight Terminal, representing a net initial yield of 4.8%.

Head of National Investment at BNP Paribas Real Estate, Hugh White, said: "Although down on an exceptional 2014, this figure must be seen in context and it should be remembered that the first six months of this year saw the second largest volume of transactions on record, up 61% on H1 2013.

"Convinced by the buoyant occupational story in the logistics sector a number of funds are actively trying to deploy their capital into the sector but are being left frustrated by a lack of opportunities. Adding to this frustration is that when opportunities do arise, aggressive bidding wars are taking place.

"This has seen yields nose-dive, with 10 deals completed this year at sub 5.2% net initial yields, with half of these within the M25."

Mr White added: "So far in 2015 the investment market for logistics property has been dominated by two types of buyers; institutional annuity buyers such as L&G and Standard Life and the specialist logistics investors such as Tritax and Blackstone, who between them have accounted for nearly half the volumes of investments done in H1."

(LM)